Market selection

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Market selection

  1. 1. Target MarketTarget Market SelectionSelection
  2. 2.  Target marketing tailors a marketing mix for oneTarget marketing tailors a marketing mix for one or more segments identified byor more segments identified by market segmentationmarket segmentation. Target marketing contrasts. Target marketing contrasts with mass marketing, which offers a singlewith mass marketing, which offers a single product to the entire market.product to the entire market.  Two important factors to consider whenTwo important factors to consider when selecting a target market segment are theselecting a target market segment are the attractiveness of the segment and the fit betweenattractiveness of the segment and the fit between the segment and the firm's objectives, resources,the segment and the firm's objectives, resources, and capabilities.and capabilities.
  3. 3. Attractiveness of aAttractiveness of a Market SegmentMarket Segment
  4. 4.  The following are some examples of aspects thatThe following are some examples of aspects that should be considered when evaluating theshould be considered when evaluating the attractiveness of a market segment:attractiveness of a market segment:  Size of the segment (number of customersSize of the segment (number of customers and/or number of units)and/or number of units)  Growth rate of the segmentGrowth rate of the segment  Competition in the segmentCompetition in the segment
  5. 5.  Brand loyalty of existing customers in theBrand loyalty of existing customers in the segmentsegment  Attainable market share given promotionalAttainable market share given promotional budget and competitors' expendituresbudget and competitors' expenditures  Required market share to break evenRequired market share to break even  Sales potential for the firm in the segmentSales potential for the firm in the segment  Expected profit margins in the segmentExpected profit margins in the segment
  6. 6.  Market research and analysis is instrumental inMarket research and analysis is instrumental in obtaining this information. For example, buyerobtaining this information. For example, buyer intentions, sales force estimates, test marketing,intentions, sales force estimates, test marketing, and statistical demand analysis are useful forand statistical demand analysis are useful for determining sales potential. The impact ofdetermining sales potential. The impact of applicable micro-environmental and macro-applicable micro-environmental and macro- environmental variables on the market segmentenvironmental variables on the market segment should be considered.should be considered.
  7. 7.  Note that larger segments are not necessarily theNote that larger segments are not necessarily the most profitable to target since they likely willmost profitable to target since they likely will have more competition. It may be morehave more competition. It may be more profitable to serve one or more smallerprofitable to serve one or more smaller segments that have little competition. On thesegments that have little competition. On the other hand, if the firm can develop aother hand, if the firm can develop a competitive advantage, for example, via patentcompetitive advantage, for example, via patent protection, it may find it profitable to pursue aprotection, it may find it profitable to pursue a larger market segment.larger market segment.
  8. 8. Suitability of Market Segments toSuitability of Market Segments to the Firmthe Firm  Market segments also should be evaluatedMarket segments also should be evaluated according to how they fit the firm's objectives,according to how they fit the firm's objectives, resources, and capabilities. Some aspects of fitresources, and capabilities. Some aspects of fit include:include:  Whether the firm can offer superior value to theWhether the firm can offer superior value to the customers in the segmentcustomers in the segment  The impact of serving the segment on the firm'sThe impact of serving the segment on the firm's imageimage
  9. 9.  Access to distribution channels required to serveAccess to distribution channels required to serve the segmentthe segment  The firm's resources vs. capital investmentThe firm's resources vs. capital investment required to serve the segmentrequired to serve the segment  The better the firm's fit to a market segment,The better the firm's fit to a market segment, and the more attractive the market segment, theand the more attractive the market segment, the greater the profit potential to the firm.greater the profit potential to the firm.
  10. 10. Target MarketTarget Market StrategiesStrategies
  11. 11.  Single-segmentSingle-segment strategy - also known as astrategy - also known as a concentrated strategy. One market segment (not theconcentrated strategy. One market segment (not the entire market) is served with one marketing mix. Aentire market) is served with one marketing mix. A single-segment approach often is the strategy ofsingle-segment approach often is the strategy of choice for smaller companies with limited resources.choice for smaller companies with limited resources.  Selective specializationSelective specialization- this is a multiple-segment- this is a multiple-segment strategy, also known as a differentiated strategy.strategy, also known as a differentiated strategy. Different marketing mixes are offered to differentDifferent marketing mixes are offered to different segments. The product itself may or may not besegments. The product itself may or may not be different - in many cases only the promotionaldifferent - in many cases only the promotional message or distribution channels vary.message or distribution channels vary.
  12. 12.  Product specializationProduct specialization- the firm specializes in a- the firm specializes in a particular product and tailors it to different marketparticular product and tailors it to different market segments.segments.  Market specializationMarket specialization- the firm specializes in serving- the firm specializes in serving a particular market segment and offers that segmenta particular market segment and offers that segment an array of different products.an array of different products.  Full market coverageFull market coverage - the firm attempts to serve- the firm attempts to serve the entire market. This coverage can be achieved bythe entire market. This coverage can be achieved by means of either a mass market strategy in which ameans of either a mass market strategy in which a single undifferentiated marketing mix is offered to thesingle undifferentiated marketing mix is offered to the entire market, or by a differentiated strategy in which aentire market, or by a differentiated strategy in which a separate marketing mix is offered to each segmentseparate marketing mix is offered to each segment
  13. 13. The following diagrams showThe following diagrams show examples of the five marketexamples of the five market selection patterns given threeselection patterns given three market segments Smarket segments S11, S, S22, and S, and S33,, and three products Pand three products P11, P, P22, and P, and P33..
  14. 14.  A firm that is seeking to enter a market andA firm that is seeking to enter a market and grow should first target the most attractivegrow should first target the most attractive segment that matches its capabilities. Once itsegment that matches its capabilities. Once it gains a foothold, it can expand by pursuing agains a foothold, it can expand by pursuing a product specialization strategy, tailoring theproduct specialization strategy, tailoring the product for different segments, or by pursuing aproduct for different segments, or by pursuing a market specialization strategy and offering newmarket specialization strategy and offering new products to its existing market segment.products to its existing market segment.
  15. 15.  Another strategy whose use is increasing isAnother strategy whose use is increasing is individual marketingindividual marketing, in which the marketing, in which the marketing mix is tailored on an individual consumer basis.mix is tailored on an individual consumer basis. While in the past impractical, individualWhile in the past impractical, individual marketing is becoming more viable thanks tomarketing is becoming more viable thanks to advances in technology.advances in technology.
  16. 16. Market selectionMarket selection (Country selection)(Country selection)
  17. 17. Foreign market selectionForeign market selection
  18. 18. Screening potential marketsScreening potential markets Step 1: Identify Basic Appeal Step 2: Access national business environment Step 3: Measure market size Step 4: Select the market
  19. 19. DemandDemand  Determine basic demandDetermine basic demand  Whether there is a basic demand for companyWhether there is a basic demand for company’’ss productproduct  Religion constraintReligion constraint –– E.g. No pork in Islamic countriesE.g. No pork in Islamic countries  Climatic conditionClimatic condition –– E.g. No hot-air conditioner inE.g. No hot-air conditioner in tropical countriestropical countries Step 1: Identify Basic Appeal
  20. 20. Resource availabilityResource availability  Determine resource availabilityDetermine resource availability  Raw materialsRaw materials  LaborLabor  CapitalCapital  LandLand Step 1: Identify Basic Appeal
  21. 21. Cultural & local forcesCultural & local forces  Cultural forcesCultural forces  Language, attitude toward business, religious beliefLanguage, attitude toward business, religious belief and customand custom  Product adaptationProduct adaptation  Some products can be sold worldwideSome products can be sold worldwide  Some products need local customizationSome products need local customization  E.g. KFC, books and magazineE.g. KFC, books and magazine Step 2: Access national business environment
  22. 22. Political & legal forcesPolitical & legal forces  Political and legal forcesPolitical and legal forces  Political stabilityPolitical stability  Government regulationGovernment regulation  GovernmentGovernment’’s attitude toward trade and investments attitude toward trade and investment  Types of restriction on import and exportTypes of restriction on import and export  Investment barriersInvestment barriers  Business ownershipBusiness ownership  E.g. 51% of local ownershipE.g. 51% of local ownership Step 2: Access national business environment
  23. 23.  Government regulationGovernment regulation  Restrict remitting profit out of countryRestrict remitting profit out of country  Strict environmental regulationStrict environmental regulation –– Strict pollution standardStrict pollution standard which may increase cost of productionwhich may increase cost of production  Require that companies divulge ceratin trade informationRequire that companies divulge ceratin trade information –– E.g. Coca-cola left India because it refused to discloseE.g. Coca-cola left India because it refused to disclose its secret Coke formulaits secret Coke formula Step 2: Access national business environment Political & legal forcesPolitical & legal forces
  24. 24. Economic forcesEconomic forces  Economic forcesEconomic forces  Fiscal and monetary policiesFiscal and monetary policies  Interest rate - Can cause high inflationInterest rate - Can cause high inflation  Currency devaluationCurrency devaluation –– Can affect exportCan affect export  Other forcesOther forces  TransportationTransportation  InfrastructureInfrastructure Step 2: Access national business environment
  25. 25. Data & InformationData & Information  InformationInformation  Industrial market dataIndustrial market data  Consumer dataConsumer data  Emerging marketEmerging market  Data may not be readily availableData may not be readily available Step 3: Measure market size
  26. 26. Market variablesMarket variables  Market sizeMarket size  Market growth rateMarket growth rate  Consumption capacityConsumption capacity  E.g. % of middle class populationE.g. % of middle class population  Commercial infrastructureCommercial infrastructure  E.g. Number of TVs, phones, PCs, cars etcE.g. Number of TVs, phones, PCs, cars etc Step 3: Measure market size
  27. 27. Market variablesMarket variables  Economic freedomEconomic freedom  E.g GovernmentE.g Government’’s trade policiess trade policies  Market receptivityMarket receptivity  Volume of international trade as a % of GDPVolume of international trade as a % of GDP Step 3: Measure market size
  28. 28.  Field tripField trip  Competitor analysisCompetitor analysis Step 4: Select the market
  29. 29. Opportunities and risksOpportunities and risks Evaluation
  30. 30. OpportunitiesOpportunities CHOOSING AND WEIGHTING VARIABLESCHOOSING AND WEIGHTING VARIABLES Variables must be weighed against each other to effectively evaluate the potentialVariables must be weighed against each other to effectively evaluate the potential success of a particular venture and to compare various ventures.success of a particular venture and to compare various ventures. OpportunitiesOpportunities Market SizeMarket Size Market size is determined by sales potential.Market size is determined by sales potential. Ease and Compatibility of OperationsEase and Compatibility of Operations Market located nearby, share the same language and offer similar market conditions.Market located nearby, share the same language and offer similar market conditions. Costs and Resource AvailabilityCosts and Resource Availability The cost of labor, the cost of inputs, tax rates, and available capital, utilities, real estateThe cost of labor, the cost of inputs, tax rates, and available capital, utilities, real estate and transportation.and transportation. Red TapeRed Tape Difficulty of getting permission to operate the business.Difficulty of getting permission to operate the business. Evaluation
  31. 31. OpportunitiesOpportunities Measure Weighting Rating (1-10) Attractiveness France India Korea France India Korea Market size Best 10 – worst 1 50% 8 9 6 4.0 4.5 3.0 Ease and compatibility of operation Best 10 – worst 1 30% 7 9 2 2.1 2.7 0.6 Costs and resource availability Best 10 – worst 1 10% 2 10 5 0.2 1.0 0.5 Red tape Lowest 10 - highest 1 10% 8 2 5 0.8 0.2 0.5 Total 100% 7.1 8.4 4.6 Evaluation
  32. 32. RisksRisks Economic and political risk ratingsEconomic and political risk ratings Risk and UncertaintyRisk and Uncertainty Firms usually experience higher risk and uncertainty when they operateFirms usually experience higher risk and uncertainty when they operate abroad.abroad. Competitive RiskCompetitive Risk A firmA firm’’s innovative advantage may be short-lived.s innovative advantage may be short-lived. Monetary RiskMonetary Risk A firmA firm’’s expansion occurs through foreign-direct investment, foreign-s expansion occurs through foreign-direct investment, foreign- exchange rates and access to investment capital and earnings.exchange rates and access to investment capital and earnings. Political RiskPolitical Risk Look for economic and social conditions that could lead to politicalLook for economic and social conditions that could lead to political instability.instability. Evaluation
  33. 33. RisksRisks MeasureMeasure WeightingWeighting Rating (1-10)Rating (1-10) AttractivenessAttractiveness FranceFrance IndiaIndia KoreaKorea FranceFrance IndiaIndia KoreaKorea Risk & uncertaintyRisk & uncertainty Lowest 10 - highest 1Lowest 10 - highest 1 50%50% 99 88 55 4.54.5 4.04.0 2.52.5 Competitive riskCompetitive risk Lowest 10 - highest 1Lowest 10 - highest 1 20%20% 33 99 55 0.60.6 1.81.8 1.01.0 Monetary riskMonetary risk Lowest 10 - highest 1Lowest 10 - highest 1 10%10% 77 55 44 0.70.7 0.50.5 0.40.4 Political riskPolitical risk Lowest 10 - highest 1Lowest 10 - highest 1 10%10% 88 99 55 0.80.8 0.90.9 0.50.5 TotalTotal 100%100% 6.66.6 7.27.2 4.44.4 Evaluation
  34. 34. Opportunity-risk matrixOpportunity-risk matrix 3.3 6.7 Low Med High Opportunities Low Med High Risks India France S Korea 6.73.3 Evaluation

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